We investigate whether rating conservatism increases with information asymmetry. We argue that high information asymmetry amplifies debtholders’ reliance on ratings for investment and contracting purposes, thus making rating agencies’ loss function more asymmetric and ratings more...

Although auditor litigation risk is considered as a leading explanation for auditor resignations, audit risk, and business risk might also trigger resignations. Auditor litigation risk is defined as the risk of the auditor being involved in a lawsuit, audit risk is defined as the risk that the...

We analyze audit fees and audit risk to extract auditor's assessment of family firms' financial reporting quality. Relative to non-family firms, we find that auditors charge significantly less from family firms and the fee difference shrinks in magnitude when family firms have high audit risk....

Prior studies provide conflicting evidence on the reporting/disclosure quality of family firms. We provide unique insights by analyzing the pricing of audit engagements. Because financial reporting quality affects audit risk, which determines how auditors price engagements, we analyze audit fees...

The controversy over Chinese reverse mergers, which are directly listed on U.S. stock exchanges, has led to concerns about the audit quality of all U.S. listed Chinese companies. Because a sizeable number of foreign firms cross list their shares as American Depositary Receipts (ADRs) issued by...

We investigate whether companies strategically change accounting estimates to manipulate earnings, as some claim (“opportunism” hypothesis), or whether these modifications represent changes in the underlying fundamentals of financially troubled or risky companies updating their priors about...